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The non-disclosure agreement (NDA) forms an obligation for the parties receiving certain confidential information not to share it with any third party without the explicit authorization of the party issuing the confidential information.

In that way, the parties can secure their interaction with their business partners, employees, suppliers, vendors, and other parties. The party that shares the confidential information included in the NDA may be liable for damages caused to the party issuing the confidential information.

Therefore, it can be used to protect business and trade secrets, intellectual property, client information, details about the litigation settlement, details about certain transactions, and more.

What is a Non-Disclosure Agreement?

The Non-Disclosure Agreement, or an NDA, is a legal document that prevents the party receiving confidential information from sharing it with third parties.

It creates a confidential relationship between the party issuing the NDA and the party receiving the confidential information. After signing the NDA, the parties will share sensitive information about themselves easily and make their communication more efficient.

The non-disclosure agreement template usually includes information about the disclosing and receiving parties, defines what information is considered confidential, provides the terms and conditions under which the receiving party can disclose the confidential information, and more.

Here, the most important section is defining the scope of confidential information. The party issuing the NDA can define that all the information is considered confidential, provide that the confidential information and documents will be marked so in future interactions, or provide the list of information that is considered confidential.

The non-disclosure agreement is also known as the confidentiality agreement, confidentiality disclosure agreement, NDA contract, and more. However, this all refers to a document that secures sensitive information and prevents its unauthorized sharing.

Non-Disclosure Agreement Forms By State

Non-Disclosure Agreement By Type

Here, you can choose between the most commonly used non-disclosure agreement types:

Types of Non-Disclosure Agreements

  • Business associate NDA

  • Employee NDA

  • Independent contractor NDA

  • Trade secret NDA

  • Mutual NDA

  • Unilateral NDA

Uses of Non-Disclosure Agreement

The non-disclosure agreement format can be used in various situations depending on the type of information the parties want to protect, the level of confidentiality, and other factors. 

Here, you can see the most common situations where the parties choose to use the NDA:

Non-Disclosure Agreements Applications

  • Protection of confidential business information: Mostly used by companies that want to protect the information about their structure, organization, business, and trade secrets, and other types of sensitive information they are sharing with their business partners, vendors, suppliers, and other parties.

  • Protection of intellectual property: The parties can use the NDA to protect their creative work, software, inventions, or other types of intellectual property.

  • Protection of litigation settlement details: After the litigation procedure is over, the parties will often create a non-disclosure agreement to protect the details of their litigation settlement agreement.

  • Protection of client information: Used by companies that have databases including their clients' personal information. They use it to protect such information in situations where third parties that maintain the database have access to it.

  • Protection of information during employment: the non-disclosure agreement for employees is used by companies that want to protect the confidential information their employees get access to during their employment period. In this case, the NDA is usually signed along with the employment agreement.

Non-Disclosure Agreement Definitions and Terms

When drafting the non-disclosure agreement, it is important to precisely define all the terms used in the document. 

In this section, you can find a list of terms most commonly used in the non-disclosure agreement:

Non-Disclosure Agreement Definitions and Terms

  • Trade Secret: It is information, including a pattern, compilation, program, formula, device, method, or other type of information, that represents a competitive advantage of a certain business on the market and is therefore kept confidential.

  • Misappropriation: Acquisition of a trade secret of another person by a person who knows or has a reason to know that the trade secret was acquired by improper means.

  • Improper means: Includes theft, corrupt practices, providing false information, violating confidentiality obligations, or engaging in electronic or alternative methods of espionage.

  • Person: A natural person, business trust, corporation, estate, partnership, association, joint venture, government, governmental subdivision or agency, or any other legal or commercial entity.

Non-Disclosure Agreement Duration

After establishing the scope of protection for confidential information and setting obligations for the receiving party, it is important to define the duration of such obligations.

First, the parties will define when the obligation starts. That is usually the moment all the parties sign the NDA, but it can also be some other date the parties determine.

Secondly, the parties should determine how long they must keep the shared information confidential. They can set an expiration date in advance, or they can provide that the obligation will stop when the parties sign the termination agreement. 

The receiving party’s obligation is also over when the shared trade secret no longer qualifies as a trade secret. 

Penalties For Breaching a Non-Disclosure Agreement

In case the receiving party breaches their confidentiality obligation, the disclosing party can use the following remedies:

Non-Disclosure Agreement Breach Penalties

  • Injunction: The disclosing party can request the court to order the receiving party to stop the violation of the non-disclosure agreement.

  • Damages: The disclosing party can also request compensation for all damages caused by the receiving party’s breach of confidentiality obligations.

  • Employment termination: In cases where the receiving party is an employee of the disclosing party, the consequence of a confidentiality obligation breach can also be the termination of employment.

  • Trade secrets: If the receiving party makes an NDA violation related to the trade secret, 18 U.S. Code § 1832 provides that the breaching party can be charged with a criminal offense. This means they can be fined not more than the greater of $5,000,000 or 3 times the value of the stolen trade secret, imprisoned for not more than ten years, or both.

How to Write a Non-Disclosure Agreement

To write a non-disclosure agreement, you should complete the following steps:

Step #1. Pick a NDA type

First, you should choose the appropriate type of NDA according to the type of information you want to protect. Moreover, you should choose between a unilateral or mutual NDA

The unilateral NDA forms the confidentiality obligation only for the party receiving confidential information, while the mutual NDA forms such an obligation for all the parties involved.

Step #2. Disclose Parties’ Information

Here, you should enter the full names of the disclosing and receiving parties. This section should also include their mailing addresses, ZIP code, city, and state. The parties can also include other details if necessary.

The same rules apply if some of the parties are legal entities. In that case, this section will provide their registered name and address.

Step #3. Define The Confidential Information

This section must precisely define what information will be considered confidential in the interaction between the disclosing and receiving parties.

Parties can define that all of the shared information is confidential, or they can define that the confidential documents and information will later be marked in their interaction, or the NDA can provide the list of information that will be considered confidential.

Step #4. Define NDA Obligations and Breach Penalties

Here, the parties will stipulate the scope of the confidentiality obligation and provide what will and what will not be considered a breach of such an obligation.

Moreover, the parties should indicate the penalties and remedies for violations of the NDA. This can be the right to an injunction, compensation for damages, termination of the contractual relationship between the parties, and more.

Step #5. Set The Time Frame and Jurisdiction

First, the parties should set the date the NDA becomes effective. Usually, it is the moment all the parties sign the document.

Secondly, the parties should determine the duration of the NDA. Here, the parties can determine a specific date of termination, or they can set the NDA to remain effective until the parties sign the termination agreement.

Step #6. Sign the Non-Disclosure  Agreement

All the parties to the NDA should sign the document. If the disclosing or receiving party is a legal person (company, governmental agency, organization, or other), the document will be signed by their official representative.

Moreover, although it is not legally required, the parties can also sign their NDA in front of a notary and provide additional authenticity for the document.

Non-Disclosure Agreement FAQ

  • If you break the NDA, you can face a lawsuit from the party that issued the NDA and be required to pay for the damages you have caused by disclosing confidential information. If you have broken the NDA by disclosing a trade secret, you can also face criminal charges.

  • The difference between an NDA and a Non-Compete Agreement is that the Non-Compete Agreement is usually signed between the company and their employee to prevent them from engaging with the company’s competition after their employment is over, while the NDA has a wider scope and prevents the receiving party from disclosing confidential information.

  • The NDA can last for as long as the parties provide in the document. Therefore, the parties can provide that the validity of the NDA be as low as a few days or for an indefinite period of time.

  • Yes, NDAs are legally binding documents. As with any other type of agreement, non-disclosure agreements are legally binding from the moment the parties sign them.

  • You can definitely back out of an NDA before signing it. However, before doing so, you should keep in mind that this action might affect the relationship between you and the party issuing the document.

    After signing the NDA, you can back out of it without facing legal consequences only under the terms and conditions for the agreement termination set in the document.

  • No, you cannot be forced to sign an NDA. However, the party that issued the NDA might not be willing to cooperate with you without signing the NDA. 

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